Barclays maintained its expectation that the Fed will cut interest rates in 2026.
According to a report published by the bank’s US economists, the Fed is projected to make two 25 basis point interest rate cuts in 2026, in March and June. Barclays argued that the risk of delayed interest rate cuts is higher compared to this baseline scenario.
The report noted that the minutes of the Fed’s December monetary policy meeting were consistent with this expectation, and that interest rates would likely remain unchanged at the January meeting. Economists commented, “The Federal Open Market Committee needs time to assess the impact of recent interest rate cuts.”
On the other hand, Mark Zandi, Chief Economist at Moody’s Analytics, argues that weakness in the labor market, inflation uncertainties, and political pressures will push the Fed towards a more aggressive interest rate reduction path in the first half of 2026. According to Zandi, the central bank could make three 25 basis point interest rate cuts before the first half of the year.
In his 2026 outlook, Zandi stated, “The main reason behind further monetary easing will be the weak job market, especially at the beginning of 2026.” He noted that fluctuations in trade and immigration policies are delaying companies’ hiring decisions, and that job growth will remain insufficient until these uncertainties are resolved. He added that if unemployment continues to rise, the Fed will likely resort to interest rate cuts.
Market expectations, however, point to a more moderate easing. According to CME FedWatch data, market pricing anticipates two rate cuts, with the first expected as early as April and the second around September.
Projections reflecting the individual expectations of Fed officials indicate the possibility of only one interest rate cut throughout 2026. The minutes from the December meeting revealed that this cut was narrowly avoided and that further easing may occur at a slow pace.
*This is not investment advice.
